CBA 300 Chapter 9
a common external trade policy toward nonmembers
Which feature of a customs union differentiates it from a free trade area? a. Harmonization of members' tax rates b. A common currency c. A common external trade policy toward nonmembers d. Ability of factors of production to move freely between members
a. There are concerns over human rights issues in the country.
Which of the following is a reason why Turkey is not yet a member of the EU? a. There are concerns over human rights issues in the country. b. Only about 10 percent of Turkey's international trade is with the EU. c. The country has yet to form a customs union with the EU. d. Turkey has a weak economy.
c. Regional economic integration
_____ is an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under global agreements. a. Foreign direct investment b. Government intervention c. Regional economic integration d. Unrestricted trade
d. European Commission
________ is similar to the Federal Trade Commission and the Department of Justice, antitrust authorities in the US a. Council of the European Union b. Court of Justice c. European Parliament d. European Commission
economic union
a common external trade policy, free flow of products, and factors of production, a common currency a harmonized tax rate and a common monetary and fiscal policy
transatlantic trade and investment partnership (TTIP)
a free trade deal between the US and the EU (28 countries) -nontariff barriers are equivalent to a tariff of 10%to 20%
greek sovereign debt crisis
a high level of debt to finance extensive spending in the public sector to buy off interest groups
October 2009
a new government announced that the 2009 public-sector deficit would be 12.7% of GDP instead of the projected 5% - the previous government had been cooking the books
Regional Economic Integration
agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other -406 regional or bilateral trade -successful in Europe
free trade area
has no trade barriers -they own trade policies with regard to nonmembers -they account for 90% of regional agreements - NAFTA is made up of US, Canada, and Mexico
customs union
has no trade barriers and a common external trade policy
common market
has no trade barriers, a common external trade policy AND allows free movement of the factors of production (labor and capital)
In 2017, the EC fined Google E2.42 billion ($2.91 billion) because
it discriminated rival comparison-shopping sites in search rankings. (google then filed an appeal)
On January 23rd 2017 President Cheeto signed a
presidential memorandum to withdraw
European central bank
similar to the US federal reserve, manages monetary policy to ensure price stability
the _______________ is similar to the federal trade commission and the department of justice, antitrust authorities in the US.
the European Commission
under nafta renegotiation Mexico countered with
- 70% North American content - a 30% regional steel requirement and 20% regional aluminum. - $16 an hour for 20% of the value of vehicles it makes ---- The US rejected and the two sides are trying to find middle ground
Members of the EU
- Free to live in any EU countries - To be qualified -Privatize state assets, deregulate markets, and tame inflation -Establish stable democratic governments; respect human rights
under nafta renegotiation the US proposed
- North American content requirement of 75% (from the current 62.5%) - A new requirement that 70% of the steel and aluminum in NAFTA vehicles be North American - New wage regulations: 40% of the value of NAFTA cars and SUVs (45% of trucks) be produced by workers making $16-$19 an hour
The Euro was
- created by the Maastricht Treaty in 1992 (effective in 1999.) - used by 19 (euro zone) of the 28 member states - euro notes and coins were issued in 2002 and the national currencies were taken out of circulation
Schengen area
- established in 1985 at Schengen, Luxembourg - Iceland, Liechtenstein, Norway, Switzerland and 22 EU members - No passport and no border controls
European Economic Area or EEA
- established in 1994: Iceland, Norway, Lichtenstein, and the EU - free movement of people, goods, services, and capital - can live in any country within the area
in 2009, the European Commission fined Intel E1.06 billion - $1.45 billion) for:
- illegally using its market power to put AMD at a disadvantage. - making payments to PC manufacturers on the condition that they purchased almost all supplies from Intel, postponed, cancelled, or restricted the distribution of AMD-based products - An EU court rejected Intel's appeal
laws are made by
- legislation (congress) - by judge - common and constitutional law - by president - executive orders
costs of the euro
- loss of control over national monetary policy - The EU is not an optimal currency area
The EU in 1993 is imperfect as an economic union:
- not all members have adopted the euro - differences in tax rates and regulations - some markets (energy) are still not fully deregulated
an executive order to establish office of trade and manufacturing policy (April 2017)
- wants to renegotiate NAFTA - will help implement the "buy American, hire American" executive order
Potential consequences of the British Exit from the EU
-The UK is less likely to attract investment from foreign multinationals -Some multinationals may move to other EU countries to maintain access to the single market -Exports to the EU may fall -Potential Scottish independence: The Scots voted by a large margin to stay in the EU
The cost of remaining in the EU
-The loss of national sovereignty: Regulations imposed by the EU -A large number of immigrants from the EU: Much of the immigration has been from eastern Europe and low skilled workers
The benefits of the euro are:
-savings from handling only one currency -lower foreign exchange and hedging costs -easier to compare prices across Europe -increased competition and lower prices -development of highly liquid pan-europeans capital market -lower cost of capital and increased investment -increases the range of investment options
b. customs union
1. A _____ eliminates trade barriers between member countries and adopts a common external trade policy, but does not allow free movement of factors of production between member nations. a. common market b. customs union c. free trade area d. political union
d. economic union
1. A(n) _____ involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. a. common market b. customs union c. free trade area d. economic union
top 5 US trading partners
1. china 2. canada 3. mexico 4. Japan 5. germany
order of levels of economic integration
1. political union 2. economic union 3. common market 4. customs union 5. free trade area (NAFTA in the middle)
to sell in both the EU and the US, automobile manufacturers must adhere to
2 different safety standards and regulations
pharmaceutical firms have to submit to
2 safety tests
Trans-pacific partnership (TPP)
A trade agreement among 12 Pacific Rim countries - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam (12 nations)
b. common market
A(n) _____ has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members. a. economic union b. common market c. customs union d. full political union
North American Free Trade Agreement (NAFTA)
Agreement signed by the United States, Canada, and Mexico in 1992 to form the largest free trade zone in the world.
EU members
Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.
the top 2 destinations for US exports and second and third largest source of US imports
Canada and Mexico
some TTP nations are interested in reviving the agreed without US
China (not TTP) is working to advance its alternative trade bloc, the Regional Comprehensive Economic Partnership (RCEP)
The European Commission imposed _______ for blocking competition for server computers and media software.
E497 billion on Microsoft
The __________ has been directly elected by citizens of the EU countries.
European Parliament
the _____________ has been directly elected by citizens of the EU countries
European Parliament
Acronym for Levels of Economic Integration
Fta.Cu.Cm.Eu.Pu.
Non EU members
Iceland, Norway, Switzerland, Liechtenstein
free trade areas
Identify the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements. a. Free trade areas b. Customs unions c. Common markets d. Economic unions
b. false
In a free trade area, countries are not allowed to determine their own trade policies with nonmembers. a. True b. False
NAFTA
The US, Canada, and Mexico (1994) - Getting NAFTA approved was a bruising political experience - Abolished tariffs on 99% of the goods traded - Removed barriers on services and most restrictions on FDI - Protects intellectual property rights - Allows each country to apply its own environmental standards - Since NAFTA, trade between America and Mexico has surged
false
The emergence of single markets will make the business environment within each grouping less competitive. a. True b. False
Brexit: In a referendum in June 2016, UK voted to leave the EU. The UK is on course to leave the EU on
March 2019
NAFTA renegotiation
auto-sector "rules origin" which dictate how much of a vehicle must be made in North America to qualify as duty-free
A ______________ coordinates the economic, social, and foreign policy
central political apparatus
a _________ that coordinates the economic, social, and foreign policy
central political apparatus
Turkey has been denied due to
concerns over human rights (toward its Kurdish minority)
Turkey has had a _________________ with the EU since 1995
customs union - about half of its trade is with the EU
In May 2010
the euro zone and the IMF agreed to lend up to E110 billion. -Greece agreed to implement strict austerity measures -the economy contracted by 29% -unemployment rate of 20%
